Adani Ports Proposed Bonds: Check Ratings On Bond From Moody, Fitch and S&P

The Adani Ports & Special Economic Zone Board of Directors approved the issuance of USD denominated foreign currency bonds (Bonds), which may be issued in one or more tranches overseas and listed on any one or more stock exchanges in India or elsewhere.

On Thursday, major rating agencies assign ratings to Adani Ports and Special Economic Zone Limited (APSEZproposed )'s foreign currency-denominated bond offering, putting the firm in the spotlight.

The total money raised will be less than US$750 million. The Bonds shall be issued to eligible persons, entities, bodies corporate, corporations, banks, financial institutions, and any other types of eligible investors entitled to invest in the Bonds under relevant legislation, whether through a private placement or otherwise.

On the Sensex, APSEZ was trading at Rs671 per piece at 11.52 a.m., down 0.15 percent. Earlier today, the stock reached an intraday high and low of Rs 679.55 per piece and Rs666.70 per piece, respectively.

Check Ratings On Adani Ports Proposed Bond

The proposed USD senior unsecured bonds of APSEZ have been assigned a rating of 'Baa3' by Moody's Investors Services. While both Fitch Ratings and S&P Global Ratings have given the same bonds a 'BBB-' rating. Fitch and Moody's have given the bonds a negative outlook, while S&P has given them a stable outlook.

Rating Agency	Rating	Outlook
Moody's	Baa3	Negative
Fitch	BBB-	Negative
S&P	BBB-	Stable

Fitch Rating

The proposed senior unsecured long-tenor notes of India-based port operator Adani Ports and Special Economic Zone Limited (APSEZ, BBB-/Negative) have been granted an expected rating of 'BBB-(EXP)' by Fitch Ratings.

"The Outlook on the proposed notes is Negative. The proposed bonds will rank pari passu with the company's existing US dollar bonds. The proceeds will be used mainly to fund capex requirements, and general corporate purposes and working capital requirements," Fitch said.

APSEZ's underlying credit profile is assessed at 'bbb' while its rating is capped by India's (BBB-/Negative) Country Ceiling of 'BBB-', Fitch added.

The credit profile of APSEZ reflects its position as India's largest commercial port operator, with best-in-class operating efficiency. Throughout economic cycles, particularly the present Covid-19-related downturn, the issuer has demonstrated throughput resilience, according to Fitch. 

Moody Rating

APSEZ's Baa3 issuer grade, according to the rating agency, underlines the company's solid market position as India's largest port developer and operator by cargo volume. The assessment also considers India's economy as a whole's long-term growth potential, which has been a major driver of the country's huge increase in trade volume in recent years.

"As the proposed USD bonds rank pari passu to all of APSEZ's existing and future unsecured and unsubordinated debt, the Baa3 rating of these bonds follows that of its existing senior unsecured bonds issued in 2017, 2019, 2020 and 2021," says Abhishek Tyagi.

The ramp-up of capacity related to its recently purchased and commissioned ports and terminals, as well as its increased share of containers with the addition of additional terminals to its portfolio, are expected to fuel APSEZ's performance over the next two to three years, according to Moody's. Meanwhile, according to Moody's, APSEZ's overall volumes are expected to expand by 20% to 25% in fiscal 2022, aided by the recent acquisitions of the Dighi and Gangavaram ports, it added.

Array

In its rating explanation, S&P stated: "We expect APSEZ to maintain its credit profile in line with the issuer credit rating. The company's financial ratios are likely to improve, driven by organic growth as well as the completion of its announced acquisitions, including that of Krishnapatnam Port Co. Ltd., Sarguja Rail Corp., and Gangavaram Port. These acquisitions were funded using cash or equity. We expect APSEZ's ratio of funds from operations (FFO) to debt to remain above 15% in fiscal 2022."

The port's strategic location, long-term contracted revenue, tariff flexibility, and strong operating efficiency all contribute to APSEZ's profitability. During fiscal year 2021, the company handled 142 million metric tonnes of cargo (up 7.4%), as well as 7.2 million twenty-foot equivalent unit (TEU) of container traffic (up 15.9 percent ). This was despite the fact that all Indian ports had experienced a 5% reduction. APSEZ was also able to keep running despite India's COVID-19 lockdowns.

Given management's ability to modify growth objectives, shareholder distribution, and investments, the stable outlook on APSEZ underscores our expectation that the company's financial structure can withstand any headwinds.

"We expect APSEZ's adjusted net debt to EBITDA ratio to be below 4.0x in fiscal years 2022 and 2023, down from 4.2x in the fiscal year 2021," S&P stated.